Murmu urges banks to put AI to work for inclusion

Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu on Wednesday urged banks to use artificial intelligence to expand financial inclusion and strengthen customer trust, while cautioning that the technology must be accompanied by robust safeguards and human judgement.

Speaking at the CNBC-TV18 Banking Transformation Summit in Mumbai, Murmu said the next phase of Indian banking would be shaped by "responsible innovation, governance, prudence, and trust," with AI playing a role in making financial services more accessible. As reported by CNBC TV18, he noted that "what formal finance lacked was not the information, but a means of using it," and that even in more sophisticated markets, "economic capacity often exists quietly, waiting for formal systems to develop the means to recognise it."

"The question before us is how well and how responsibly we choose to use it," he said, according to the same report.

Murmu highlighted that the Financial Inclusion Index rose to 70 in March 2026 from 67 a year earlier, with the improvement driven largely by usage rather than access. He also noted that 52% of fresh businesses entered the formal credit system in 2022-23, falling to 42% by 2025-26, while outstanding commercial credit grew 14% during the year.

Human judgement 'indispensable'

Murmu emphasised that intelligence should not be limited to AI but also include analytical, human, governance, and collective intelligence. Collective intelligence, he said, entails information being pooled across banks. He further stressed that human judgement is indispensable in implementing AI and identifying loopholes.

"Its purpose is not to pull governance into day-to-day execution. It is to see where institutional capability or risk appetite is falling behind changing needs, and where separate weaknesses, each individually manageable, might combine into something larger," he said, as quoted by The Indian Express.

He also warned that "a model that performs well overall can still fail a small but already vulnerable group," adding that "intelligence, therefore, demands clarity — about what a technology delivers, what it leaves out, and whether its output fits the decision at hand."

Credit for the 'credit-invisible'

Murmu said banks should use AI and technology to reach and understand new borrowers, cautioning against mistaking the absence of information for adverse information. As reported by The Indian Express, he stated: "Where a lender genuinely lacks reliable information about a borrower, the absence of information should not, by itself, be mistaken for adverse information."

"Treating 'we don't know' as though it meant 'we know it's bad' leads to credit being denied where it need not be," he added, emphasising that this is precisely where banks must put their technological capabilities to work.

CNBC TV18 reported that Murmu listed alternative data sources such as cash flows, GST filings, utility payments, e-commerce records, mobile usage, agricultural data, and geospatial data as tools to assess borrowers who lack traditional credit histories. He said AI could help banks process audio descriptions from borrowers, images of crops or inventory, and weather patterns affecting seasonal cash flows, provided such information is captured with consent and tested for reliability and bias.

Productivity beyond cost ratios

Murmu argued that the productivity of banking should not be measured solely by output per employee or cost-to-income ratio. As quoted by CNBC TV18 and The Indian Express, he said: "Productivity in banking is not merely output per employee or the cost-to-income ratio," but whether the institution reaches a borrower it could not reach before, resolves a grievance that would have remained pending, or prices risk more accurately.

"If AI compresses costs without widening reach or improving customer experience, we shall have automated the existing system rather than improved it," he said.

Murmu also cautioned against excessive reliance on algorithms, emphasising that human judgement remains essential. According to The Hindu Business Line, he said bank boards and senior management must retain accountability for decisions made with AI assistance and ensure robust governance, oversight, and risk management. He underlined the importance of transparency in AI-driven decisions, stating that customers should be informed when automated systems are being used and must have access to human review when decisions significantly affect them.

Addressing digital fraud risk

Murmu noted that while uniform adoption of technology and models increases efficiency across the banking system, this "undue concentration" also raises the risk of digital fraud, which can move through multiple accounts and institutions. He mentioned 'MuleHunter.ai' and the 'Digital Payments Intelligence Platform' as the Reserve Bank's answer to collective fraud risk, as reported by The Indian Express.

Highlighting the strength of the Indian banking sector, Murmu said banks are well-capitalised, profitable, and resilient, but cautioned that success should not be measured solely by balance sheet growth. The focus, he said, should be on how effectively financial services reach underserved customers and support broader economic development.

He further said that AI can help banks identify emerging weaknesses in areas such as fraud, conduct, operations, and cyber risk by analysing structured indicators alongside audit observations, incident narratives, customer complaints, and system logs. Banks must retain the judgement, capability, and alternative arrangements needed to intervene when AI systems fail or behave unexpectedly.

Murmu also observed that younger and digitally confident customers may prioritise speed and convenience, while older customers or those less comfortable with technology may prefer assisted access, personal interaction, and reassurance on security. He called for clarity on responsibility for product suitability, data use, service quality, and continuity across the delivery chain as banking becomes more complex.

Trust, he said, remains the foundation of the banking system and might define the next era of Indian banking.